MNCS Morning Navigator 22 July 2020

Global Market Highlight

DJIA rose by +0.60% on Tuesday (21/07)while followed by various movement from Nasdaq (-0.81%) and S&P 500 (+0.17%). The strengthening was caused by the impact of the release of manufacturing index data that signals the economic recovery that will take place quickly in the US. The Chicago Manufacturing Index rose to 4.11 from 2.61, higher than estimation predicting that the index would not fly above 4. If this index is below 0, economic growth would slow. Meanwhile, the market is expecting a new stimulus from the US Government to maintain economic recovery from recession due to the corona pandemic. Moreover, the market will look forward to several data releases today, such as: 1) US Mortgage Application; 2) US Existing Home Sales; 3) US House Price Index.

Domestic Updates

The Indonesian currency is valued at IDR14,741/USD at July 21, 2020. This value is an 4.20% MoM increase, a 5.76% YoY increase and a 6.36% YTD increase. The weakening IDR is a trend in almost every July due to the repatriation from dividends. In July, many Indonesian companies are distributing dividends. Foreign investors who collect these dividends will convert the denotation of the dividends to the USD, putting a downward pressure in IDR and weaken the currency. In the next 3 months, IDR is estimated to weaken further in the range of IDR14,736/USD to IDR14,979 USD as seen in forward contracts.

Company News

1. INAF IJ will target to obtain IDR1.64 tn in revenue and IDR30 bn in net profit by the end of FY20E. It plans to achieve this through strengthening its medical device business and launch seven medical products at the end of July 2020. Management revealed that orders from the company’s medical equipment increased sharply in 1Q20 (Market Bisnis). MNCS Comment: The pharmaceutical sector is benefited from the pandemics as people seek more vitamins and health equipment. INAF is currently traded at 9.65x PBV.
2. SIDO IJ booked a revenue of IDR1.46 tn which rose by 3.51% YoY. Even though COGS increased by 4.06%, they were able to reduce general and administrative expenses by 13.63% in 1H20. Based on business segmentation, revenue from herbal products and supplements is still the company’s biggest revenue contribution at 63.25%. SIDO managed to record a fairly good growth in 1H20, by scoring a net profit of IDR413.79 bn, which is a 10.6% YoY increase. (Market Bisnis). MNCS Comment: SIDO still recorded a solid performance during this troubled times as people still sought for herbal remedies. SIDO is currently traded at 22.55x/6.05x PE/PBV.
3. DOID IJ posted a 9.39% YoY decrease in 1Q20 operating income to USD193.82 mn. Worse, they suffered a loss in net income amounting to USD22.81 mn.Similarly, coal production decreased by 8% YoY to 22.3 mn tons. Management said that the decline in revenue and production was due to the weakening global coal market. For example, it estimated that the global coal import demand has decreased by around 10% due to Covid-19. Going forward, management is focusing on asset optimization and reducing costs (Kontan). MNCS Comment: DOID was impacted by a slump in coal demand during the pandemics as business and economic activities were halted temporarily. DOID is currently traded at 0.48x PBV.

IHSG Updates

JCI increased by +1.26% to 5,114.71 on Tuesday (21/07)although followed by net foreign sell reaching IDR94.01 billion. This increase occurred after the corona vaccine from China had arrived in Indonesia and were undergoing clinical trials. The government confirmed that the Covid-19 vaccine candidate from Sinovac Biotech is in the process of a third phase clinical trial in Biofarma. Furthermore, Indonesia is still recording an incline in the Covid-19 cases with 1,655 new cases making the total reached 89,869. So the arrival of the vaccine candidate is responded well by the market as it raises optimism towards recovery. We estimate JCI will move in the range of 5,022-5,140 while waiting for Loan Growth data release. Today's recommendation: UNTR, TKIM, ACES, EXCL.

Corporate Action

Cum Dividend: ASBI

RUPS: CTRA

Recording Date: STTP

Disclaimer On

UNTR, TKIM, ACES, EXCL, SIDO, DOID, INAF